The market has always been at risk for this. Market Makers were supposedly the back stop before the electronic exchanges but they were always cowards too, and bailed when the bullets started flying. The only entity to provide a real backstop is the government and always will be. Who do you think purchased the market en mass at Dow -1,000 during the flash crash? It sure wasn't a non-government entity or private individuals. It was many of the large banks acting as surrogates for the Fed who has unlimited manipulation power, and the only entity with an "Other" column on their balance sheet that can hide the purchases.

The market has always been at risk for this. Market Makers were supposedly the back stop before the electronic exchanges but they were always cowards too, and bailed when the bullets started flying. The only entity to provide a real backstop is the government and always will be. Who do you think purchased the market en mass at Dow -1,000 during the flash crash? It sure wasn't a non-government entity or private individuals. It was many of the large banks acting as surrogates for the Fed who has unlimited manipulation power, and the only entity with an "Other" column on their balance sheet that can hide the purchases.

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No, it was short covering and reaccumulation. The next day, Friday, was also accumulation. What followed was a short squeeze, which lasted three days before the market was allowed to drop owing to background weakness which has been apparent since late April.

Removing the backstop of short covering can be very dangerous in these conditions. Notice the sequence of events in fall 2008, with shorts being forced to close out positions in financials, and when the inevitable collapse came there was no bid for 200 points. Who do you think was selling during the short covering squeeze sparked by the legislation? Longs to close.